As a matter of course now, in its procurement of everything from pencils to legal services, the Royal Bank of Canada asks suppliers about diversity in their hiring and promotion policies.
"It's working its way into our RFPs [requests for proposals]" said Charles Varvarikos, who is head of facilities sourcing for RBC and involved in the bank's corporate social responsibility initiative.
The bank has long promoted diversity within its own ranks, aiming to increase the representation and advancement opportunities for women, visible minorities, aboriginals and people with disabilities.
But in its Diversity Blueprint, published last year, RBC said it would seek to increase "supplier diversity" as well, picking up on a trend that is well established in the United States.
The bank's efforts add up to primarily an awareness-raising exercise with suppliers at this point, said Linda Mantia, the bank's senior vice-president of procurement and corporate real estate. "I have yet to see a supplier being rejected from the process because we didn't feel it met some criteria for diversity," she said.
Still, "all things being equal," prospective suppliers that are more aligned with the bank's corporate social responsibility objectives have a better shot at being selected, Ms. Mantia said.
With 84 per cent of the Fortune 100 companies in the U.S. now including diversity in their requests for proposals, and the practice catching on in Canada, the business case for diversity has become all the more compelling, said Fiona Macfarlane, a lawyer and managing partner at Ernst & Young Canada LLP.
"Leading corporations are increasingly demanding greater diversity from their partners, clients and customers," said Ms. Macfarlane, lead author of a briefing paper on the subject recently published by the Canadian Institute of Chartered Accountants.
A key benefit of this sourcing strategy is that a broader pool of prospective suppliers leads to more competitive pricing, RBC officials said. The bank offered an example in which it had identified two suppliers of a type of equipment and service. Then, by networking with a diversity-focused association, it identified a third.
"Needless to say, in procurement moving from two to three options is significant," the bank said in a statement. "We believe that diversity is fundamental to achieving superior business results."
Both Ernst & Young and RBC extend their diversity efforts well beyond the traditional "equity groups" to include new Canadians, religious minorities and lesbian, gay, bisexual and transgender (LGBT) people, in part because having employees from these groups helps inform marketing decisions. "RBC wants to be the financial institution of choice for newcomers to Canada and the cultural communities they represent," the bank said in its Diversity Blueprint document.
Doing so is also prudent from a human resources standpoint, Ms. Macfarlane said, with an expected exodus of baby boomers from the work force. Companies also need senior employees who can speak the languages of prospective customers in Canada and elsewhere, she said.
At the same time, regulators and investors are paying more attention to diversity at the board level. The Securities and Exchange Commission in the U.S. now requires companies to disclose whether, and how, their nominating committees consider diversity in identifying nominees for director, Ms. Macfarlane said.
While the bottom-line impact of diversity can be difficult to quantify, the CICA report noted that a 2005 study on the business case for diversity found that, on average, organizations with a strong commitment to diversity outperformed their peers.
Sharlyn Ayotte, an Ottawa entrepreneur who lost her sight before she turned 30, said the banks were among the first corporations to realize they could better serve their diverse markets by contracting with suppliers from diverse backgrounds.
When Ms. Ayotte incorporated T-Base Communications in Ottawa in 1998, RBC was one of her first major clients, drawing on her expertise to better serve visually impaired customers. Today, T-Base, which converts documents into Braille and large-print formats for business customers and shareholders, works with major corporations across North America.
At RBC, potential suppliers are questioned more carefully when the bank is procuring for its global operations, Mr. Varvarikos said. For instance, one of the questions on the RFP might be: "How could you help RBC promote diversity through the products we would buy from you?"
In the past two years, the bank has bolstered its network of suppliers through its sponsorship of WEConnect Canada, which links woman-owned enterprises with corporate buyers, and the Canadian Aboriginal and Minority Supplier Council, which is affiliated with the National Minority Supplier Development Council in the U.S.
The benefits have flowed both ways, Mr. Varvarikos said. "We have examples of suppliers where we were their first big client that helped them become successful."
Special to The Globe and Mail